Half Year Report 2010/11
At the heart of power electronics

BUSINESS REPORT

Dear Shareholders,

The net profit for the first half year 2010/11
amounted to CHF 19.8 million, which is a

LEM has had a good first half year 2010/11.

significant increase from the CHF 1.6 mil-

We have achieved record sales of CHF

lion of the same period last year.

141.8 million, which represents an increase of 80% compared to the first halfof last year. Sales in the second quarter

The Industrial Segmentof this year were 12% higher than in thefirst quarter.

Sales in the Industrial Segment were CHF
130.8 million, which was an increase of

The bookings level for the first half year

80% compared to the same period ofremained high at CHF 184.4 million. The

last year. The operational EBIT for thesecond quarter bookings were slightly

first half year amounted to CHF 28.6 mil-lower than those of the first quarter. The

lion. Europe still remained the main mar-reason for this is that many custom-

ket for LEM with 54% of sales, but Asia

ers placed advanced orders in the firstis catching up fast and now represents

quarter of this year. Our book-to-bill ratio

34% of total sales in this segment. The

reached 1.2.

North American region remained stablewith 11%. The remaining 1% of sales are

The shortage in the electronic compo-

in the Rest of the World.

nents market still impacted our operations ; however we have been working

Sales in the Industry Market were doing

hard with our suppliers to solve this issue.

very well and have increased by 104%

We have kept our tight cost control, which

compared to the same period last year.

together with the increase in sales has

The main drivers in this market were

driven down the SG&A spending as a per-the renewable energies, especially thecentage of our sales. In order to face thephotovoltaic applications. Transducers

increased volumes we have taken meas-

for the electric motor drives were alsoures to strengthen the structure of the or-

performing very well. We have recently

ganization. These effects were not yet fullylaunched a range of new products for thereflected in the first half year figures.

photovoltaic market based on a closed
loop fluxgate technology. We are seeing

Even with this growth momentum wea high demand for these transducers andclosely managed our efficiency andthe ramp up of production is occurring

our cost. Consequently our profitability

much faster than initially planned.

was exceptional. The gross margin re-3

mains stable at 43.7% despite adverse

The Traction Market has been robust

exchange rate effects. The operationaland sales grew by 11% compared to

EBIT for the first half year was CHF 30.3

last year. This was due to two reasons :million, which is an increase of overfirstly the high demand for our products

250% compared to the same period lastin the Chinese market, where LEM has

year. The return on sales was positively

become the market leader. The second

impacted by the high volume and was at

reason was the success of the energy

21.4% in the first half year.

metering in trains, which has becomeessential due to privatization and crossHans Dieter Huber, who was in charge of

nomic and currency related uncertainties

border traffic. LEM has just launched

the Industry Market until now, will be in

could impact us in 2011.

a complete range of products that are

charge of the entire Industrial Businesshighly accurate and comply with all thewhich includes the Industry, Traction andWe will continue to work on adapting ourrequired standards. These products canEnergy & Automation Markets.

capacity to the demand of our customers whilst at the same time keeping ameasure current, voltage and energy con-strict cost control.

sumption on board of the train. These

Jean-Marc Peccoux has just been ap-

values are used for billing purposes frompointed VP of the R&D team. Jean-Marc

the respective local electricity suppliers.

has been with LEM for almost 10 years,

We confirm our belief in the growth driv-

most recently the Corporate Quality Man-ers for our business :The Energy & Automation Market kept

ager and responsible for the “Made by

developing well. Sales increased by 67%

LEM Quality” of our products worldwide.

The Automotive Segment• the need for more energy and thedemand for more renewable energy

compared to the same period last year.

Share buyback program• the need for reliable energy and formore controls as well as standby battery management

On 1 September, 2010 we have suc-• the need for better energy efficiencies,

Growth in the Automotive Segment was

cessfully launched the share buyback

increasing the demand for the moredeveloping as planned with sales of CHF

program, which runs for one and a half

11.0 million, an increase of 79% com-

years covering a volume of up to CHF 15

pared to the same period of the previous

million on a second trading line. This pro-transport and automobiles with a shift

year. Sales in the traditional car battery

gram has been initiated in anticipation of

to more energy friendly solutions

management were growing at a fasterfuture profitable growth and consideringpace than the average growth of the total

the high net cash position of the com-

We would like to thank you for your con-

Automotive market. Sales for our prod-pany. Our goal is to increase the finan-tinued trust in LEM.

ucts in the green cars – the hybrid elec-

cial leverage in the balance sheet and totric vehicles and electric vehicles – were

finance the company through a healthy

progressing well and grew twice as fastmix between equity financing and loans.

as for those of our traditional Automotive

As a result, LEM took up bank loans ofbusiness. The operational EBIT for thisCHF 8 million and the excess cash has

Felix Bagdasarjanz

Segment was CHF 1.7 million and we are

been reduced.

Chairman of the Board

efficient motor controls• the need for more mobility, publicWith kind regards,

confident that we have durably passed
the breakeven point. This is mainly due tovolume ramp up and cost savings.

Changes in key
responsibilities

OutlookWith the strong bookings levels achieved,

François Gabella

we expect sales in the second half of the

President & CEO

year slightly above the level of the firsthalf of the year to reach CHF 285 toFrom now on, Luc Colombel, who was

295 million for the full year 2010/11. Thispreviously the VP of Traction and Auto-sales level would be an increase of overmotive, will be fully dedicated to the Auto-

50% compared to previous year’s sales

motive Segment. This reflects the growingof CHF 185.5 million. Despite this con-importance of this Segment for LEM.

fident forecast we remain alert as eco-4

BUSINESS REPORT

April to September
20010/11
In CHF thousands		

2009/10

Sales
Cost of goods sold141’780(79’787)

78’816(45’132)

Gross margin
61’993
		Sales expense(10’991)
Administration expense(14’467)
Research & development expense(6’144)
Other expense(306)
Other income
242

33’684

Operational EBIT
30’327
		Additional SOP costs/income
(429)
		
EBIT
29’899		Financial expense(331)
Financial income
87
Foreign exchange effect(2’406)
Profit before taxes
27’249		
Income taxes(7’439)Net profit for the period
19’810		

5(9’199)(10’920)(5’094)
(65)
199
8’605
(4’810)
3’796
(162)
19
(594)
3’059
(1’487)
1’571

Interim Consolidated
Financial Statements

Consolidated STATEMENT OF FINANCIAL POSITION

Assets30.09.2010

31.03.2010

Current assets		Cash and cash equivalents
19’387
Accounts receivable
60’572Inventories
32’098Other current assets
2’787

29’75643’45421’744
1’989

In CHF thousands

Total current assets
114’843
		
Non-current assets		
Deferred tax assets
607
Property, plant and equipment
23’012Intangible assets
9’073
Other non-current assets
1’673

96’943

Total non-current assets

34’36635’719Total assets

149’209

132’662		
30.09.2010

31.03.2010

In CHF thousands		Current liabilities		
Accounts payable
35’347
Accrued expenses and deferred income
11’166
Current income tax payable
5’078
Current provisions
676
Current financial liabilities
8’002
Other current liabilities
6’807

23’416
10’077
2’033
328
2
7’335

Total current liabilities

67’07543’191

Non-current liabilities		
Non-current provisions
1’627
Deferred tax liabilities
4’650
Other non-current liabilities
112

1’729
4’261
102

Total non-current liabilities

6’389

6’092

Total liabilities
73’464		Equity		Share capital
575
Treasury shares and derivative instruments on treasury shares(5’225)Reserves and retained earnings
80’39449’283Equity attributable to equity holders of the parent
75’744Non-controlling interests		

83’165214

Total Equity

75’744

83’379Total liabilities and equity

149’209

132’662

Liabilities and equity

7662
23’665
9’697
1’695

575
(3’387)
85’977

CONSOLIDATED INCOME STATEMENT
April to September
2010/11

2009/10141’780(79’787)

78’816(45’132)

Gross margin
61’993
		Sales expense(11’035)
Administration expense(14’822)
Research & development expense(6’173)
Other expense(306)
Other income
242

33’684

In CHF thousands
Sales
Cost of goods sold(9’698)(15’066)(5’258)(65)
199

Operating profit
29’899		Financial expense(331)
Financial income
87
Exchange effect(2’406)

3’796

Profit before taxes

27’2493’059

Income taxes(7’439)(1’487)

Net profit for the period
19’810		
Attributable to :		
LEM shareholders
19’759Non-controlling interests
51
Net profit for the period
19’810

1’571

Earnings per share		
Basic earnings per share
17.31
Diluted earnings per share
17.26

(162)
19
(594)

1’553
18
1’571

1.36
1.36

8

CONSOLIDATED CASH FLOW STATEMENT
April to September
2010/11

2009/10

In CHF thousands
		Cash flow from operating activities		Net profit of the period
Adjustment for non-cash items
Cash flow before changes in net working capital
Cash flow from changes in net working capital

19’810
5’676
25’486(15’044)

1’571
2’177
3’748
3’469

Cash flow from operating activities

10’442

7’217

Investment in fixed assets
Disposal of fixed assets and intangible assets
Acquisition of companies
Investment in intangible assets
Increase (-) / decrease (+) in other assets(2’893)
104
0
(89)
7

(3’220)67(1’213)(6’176)0Cash flow from investing activities(2’871)(10’542)

Acquisition of non-controlling interests
Treasury shares aquired
Dividends paid to the shareholders of LEM Holding SA
Dividends paid to non-controlling interests
Proceeds from bank borrowings(197)(2’458)(22’895)
(50)
8’010

0
0
(11’372)
(48)
7’660

Cash flow from financing activities(17’590)(3’760)Change in cash and cash equivalents(10’019)(7’085)

Cash and cash equivalents at the beginning of the period

29’75727’951

(351)

(488)

19’387

20’379Cash flow from investing activities

Cash flow from financing activities

Exchange effect on cash and cash equivalents
Cash and cash equivalents at the end of the period

9

CONSOLIDATED STATEMENT OFCOMPREHENSIVE INCOME
April to September
2010/11

2009/10

Net Profit for the period recognised in the income statement

19’810

1’571

Currency translation difference(2’579)(2’539)In CHF thousands

Unrealized gain on derivatives designated as cash flow hedges

29

Total comprehensive income for the period

17’259(968)

Attribuable to shareholders

17’208

(986)

51

18

Attribuable to non-controlling interests

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holder of the company
In CHF thousands

SharecapitalTreasury Performance
sharesshare plan

(5'627)423

Fair value
reserve

Translation
reserve

Retainedearnings andother reserves

Noncontrollinginterests

Total
equity(2)

3'464(2'539)84'464
1'553(11'372)

195
18

83'492(968)(11'372)(48)
211

1 April 2009
Total comprehensive income
Dividends paid
Dividends paid to non-controlling interests
Performance share plan

575

30 September 2009575

(5'627)

634

(2)

925

74'645165

71'315

1 April 2010
575
Total comprehensive income
Dividends paid
Dividends paid to non-controlling interests
Changes in non-controlling interests
Performance share plan
Movement in treasury shares
Movement in derivative instruments on treasury shares(3'387)

925

7
29

1'482
(2'579)83'56319'759(22'895)
0
18
0
0

214
51
(50)
(215)

83'37917'259(22'895)
(50)
(197)
86
(1'838)030 September 2010

(5'225)075'744

(48)
211

575

86
(1'838)
0
1'011

36

(1'097)80'44510

Notes to the interim consolidated
financial statements
1. Segment Information
April - September 2009

Automotive

LEM Group

In CHF thousands			
Sales
72’703
6’113
EBIT
5’169
(1’373)

Total
78’816
3’796

April - September 2010

Industrial

Automotive

LEM Group

In CHF thousands			
Sales
130’819
10’961EBIT
28’226
1’673

Total
141’780
29’899

2. Nature of operations
LEM Group is a market leader in providing
innovative and high quality solutions formeasuring electrical parameters. Its coreproducts – current and voltage transducers– are used in a broad range of applicationsin industrial, traction, energy and automotive markets.

3. Basic principles of group accounting
These unaudited consolidated financial
statements for the six months ended on
September 30, 2010 have been preparedin accordance with International Accounting Standard (IAS) 34 “Interim Financial
Reporting”. They do not include all theinformation and disclosures presented
in the annual consolidated financial statements and should therefore be read in
conjunction with the year that ended 31
March 2010.
The accounting and valuation policies are
consistent with those applied in preparing
the annual consolidated financial statements for the year 2009/10, except where
noted below.
The preparation of the interim consolidated
financial statements requires management
to make estimates and assumptions that
affect the reported amounts of revenues,
expenses, assets and liabilities and disclosure of contingent liabilities at the date of
the financial statements. If in the future such
estimates and assumptions, which are
based on management’s best judgement at
the date of the financial statements, deviate
from the actual circumstances, the original
estimates and assumptions will be modified
as appropriate in the period in which the circumstances change.

11

Industrial

4. Adjustments to new IAS/IFRS standards and interpretations
The following new and revised standards
and interpretations became effective for thereporting year 2010/11:• IFRS 3 – Business Combinations (revised) : continues to apply the acquisition
method to business combinations, withsome significant changes. This standard
applies prospectively.

• Amendments to IAS 27 – Consolidated and Separate Financial Statements :requires the effects of all transactions witha non-controlling interest to be recognizedin equity if there is no change in control andthese transactions will no longer result inadjustments to goodwill or recognition ofgains and losses. The standard also specifies the accounting when control is lost.
These amendments apply prospectively.

• Amendment to IAS 32 – Classificationof Rights issues• Amendment to IAS 39 – Financial Instruments Recognition and Measurement. Eligible Hedged Items : clarifies
whether a hedged risk or portion of cash
flows is eligible for hedge accounting.

• Amendments to IFRS 1 – Additional
Exemptions for First-time Adopters :provides further exemptions for the use of
deemed costs for oil and gas assets, arrangement containing a lease, and decommissioning liabilities included in the costs ofproperty, plant and equipment.

• Amendments to IFRS 2 – Group Cashsettled Share-based Payment Transactions :clarifies the scope and the accounting forsuch transactions in the separate or individual financial statements of the entity receiving the goods or services when that entity
has no obligation to settle the share-based
payment transaction.

• IFRIC 17 – Distribution of non-cash
assets to owners : provides guidance on
accounting for arrangements whereby anentity distributes non-cash assets to shareholders either as a distribution of reserves
or as dividends.

• Improvements to IFRSs
The impact of the application of IAS 27 (revised) in the acquisition of the additional 10%
in TVELEM is described in note 8 below.
The other new and revised standards do
not have a material effect on the consolidated financial statements of LEM Group.

5. Income taxes
Income tax expense is calculated based on
the best estimate of the applicable annual
income tax rate expected for the full year.
The decrease in the effective tax rate of
LEM Group is due to the changes of the
profitability of the Group’s subsidiaries in thevarious jurisdictions and withholding taxes
on dividends distributed out of prior years
profits within the Group.

6.

Financial Liabilities

LEM Group increased financial short-term
liabilities to CHF 8.0 million (nil at 31 March
2010) as short term credit lines.

7.

Shareholders’ equity

At the shareholders’ meeting held in Geneva on 25 June 2010, the shareholders
approved the distribution of an ordinary dividend of CHF 5.00 per share and an extraordinary dividend of CHF 15.00 per share.
The gross dividend paid on 5 July 2010
amounted to CHF 22.90 million (prior year :ordinary dividend of CHF 10.00; total CHF
11.37 million).
In the second quarter, 1’385 shares weresold to employees at market value less CHF
15 discount per share with an average priceof CHF 326.73. The treasury shares werebooked out at historical cost and the difference to the selling price was booked toother capital reserves.
On 1 September 2010, LEM has launcheda share buy-back program which runs for
one and a half years covering a volume of
up to CHF 15 million on a second tradingline. At 30 September 2010, 7’000 shares
have been bought for a total amount of
CHF 2’458 thousands.

10. Exchange rates
The following exchange rates were used :Period-end rate
for balance sheet

Period average rate
for income statement

30.09.10

31.03.10

2010/11

2009/10

EUR

1.329

1.432

1.372

1.517

GBP

1.543

1.603

1.627

1.730

JPY

0.01170.01150.01200.0114

USD

0.976

1.064

1.071

1.088

RUB

0.032

0.036

0.035

0.034

CNY

0.146

0.156

0.158

0.160

DKK

0.178

0.192

0.184

0.204

8. Changes in scope of consolidation
During the first half year 2010/11, the scopeof consolidation has changed as follows :On 28 September 2010, TVELEM acquired
its own shares representing the outstanding
10% of ownership. The percentage of interest in TVELEM is now 100%. This increase
in interest led to the recognition of CHF
18 thousands in equity (difference between
amount paid and non-controlling interest
value) per 30 September 2010.
In the previous year, the following change inthe scope of consolidation occurred :Acquisition of 100% of the shares of Danfysik ACP A/S in Denmark on 28 July 2009.

9. Events after the balance sheet date
The Board of Directors and Senior Management are not aware of any significant events
up to the date of approval of the consolidated financial statements on 29 October2010 that would require an adjustment incarrying amounts of the Group’s assets andliabilities.

12

Postal address
LEM Holding SA
P.O. BOX 785
CH – 1212 Grand-Lancy 1

Visitors address
LEM Holding SA
8, chemin des Aulx
CH – 1228 Plan-les-Ouates
Phone +41 22 706 11 11
Fax+41 22 794 94 78